TNAG-1512-FCO40-2070-Kowloon-Canton-highway-and-Kowloon-Canton-Railway-Corporatio-1986 — Page 80

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An explanatory note on the assessment of compensation

Annex

The basis of compensation proposed will allow for KMB to be compensated for the opportunity to invest in capital assets (and thus earn a permitted return under the profit control scheme) which will not arise because of the curtailment of its franchise.. Because KMB is likely to be investing in assets both for additions to the fleet and replacements throughout its franchise area it is not possible to predict accurately the extent to which this investment will be reduced solely and directly as a result of the removal from that franchise of the identified routes. It will be necessary for KMB to make a claim for compensation at an appropriate time and for this to be considered in the light of the factors prevailing at the time.

2.

Any changes in KMB's operational expenses and revenue resulting from the curtailing of their franchise will automatically be covered since the profit control scheme applies to KMB's operations in total and it is total operating costs and total operating revenue which are considered in determining total profit which is limited by the profit control scheme. The question of compensation for changes in operational expenses and revenue will therefore not arise.